Desicritics Comments on Is The United States Near Roman-style Collapse?

Comment by DMMGEIMZ4

Thu, 18 Oct 2007 12:44:40 EDT

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Comment by Ruvy in Jerusalem

Sat, 18 Aug 2007 16:03:38 EDT

Speaking as an ex-pat, or more precisely, a former American, the only thing I can say to comment #39 is "Quoted for truth!" That hurts to write, but it is true.

Comment by B

Fri, 17 Aug 2007 16:23:32 EDT

The dollar cant fall to quickly. Other countries will not allow it. Japan, China, and many European countries cant just say, "I am selling dollars, I dont want them..." Because if they do the dollar would plummet so much that they would also lose much. Bad feedback-loop to get into. It would be a world recession. Thats why the US needs to get its shit together, because whats bad for them is bad for most of the world (although whats good for them may not be good for most of the world!!!!)

Comment by Sanjay Garg

Thu, 16 Aug 2007 13:27:09 EDT

@Silentgod: Sanjay, what would 2 trillion of asian foreign reserves do to fix the looming social security torpedo about to hit the U.S? Unfunded social security and medicaid for the U.S currently stands at almost 50 Trillion dollars. Securitizing 2 trillion of this debt with asian reserves to try to fix the problem would be like trying to control a roaring forest fire by pissing at it! The fire isn't quite roaring yet so no need for a panic relief ;-) The 50 trillion unfunded liabilities are not due TODAY & are computed as the Present Value of future liabilities projected out to 2050 and beyond. To meet current liabilities, one would not even need to securitise all of the Asian debt.

Comment by silentgod

Thu, 16 Aug 2007 11:50:38 EDT

Sanjay, what would 2 trillion of asian foreign reserves do to fix the looming social security torpedo about to hit the U.S? Unfunded social security and medicaid for the U.S currently stands at almost 50 Trillion dollars. Securitizing 2 trillion of this debt with asian reserves to try to fix the problem would be like trying to control a roaring forest fire by pissing at it! America's situation, unfortunately, is like the crisis being faced by American auto makers - GM, Ford, and Chrysler. The similarities are uncanny. Like America, the best days of these previously almighty corporations are behind them. Total inability to compete, staggering debts, unequal costs scale, and an untenable health care burden have all worked to make the demise of these once great powers inevitable. Mercedes Benz just paid big money to be relieved of the burden of Chrysler. MB realized that if it doesn't untangle itself, it risked going down with the sinking Chrysler ship. Sure foreign countries have an interest in an economically healthy America, but at some point, just like Mercedes Benz, it will become obvious that the American condition is not only terminal but infectious, and these countries will all, as they say, run for the borders. They will then find a way to shift the trade to the European union, which is now the #1 world economy. THE ONLY THING that can save America is #1. To seriously cut spending #2. To cut dependence on foreign energy sources #3. To find some way to level the trade imbalances it has with many countries, especially china. #4. To float the social security debt in the world financial markets (not just asia.) #5. Then, MOST IMPORTANTLY, serious incentives need to be put in place for U.S employers to stop the bleeding of American jobs overseas. I don't think the immigrant situation is a threat to the American economy. I believe immigrants actually contribute to the economy, not detract from it. America's biggest threat is loss of American jobs to foreign countries. Basically America has to completely rethink it's labor system to be more in line with the new, more efficient world labor system of cheaper wages and more efficient production. The unavoidable casualties in this process to save America would be the ultra high American standard of living, the ultra high American ego and "we are better than the rest of the world" attitude, as well as the social depression of the American middle class. Yes, I hate to say it, but America to be saved, would actually have to become more like a third world nation! Ironically, it's this swallowing of ego and pride that always appears as the salvation of great empires on the verge of collapse. If Rome had acknowledged it's obvious, glaring weaknesses and addressed them practically, instead of pretending they didn't exist because of overinflated egos and pride, Rome, theoretically, could still be standing today. Unfortunately, Americans have had it so cushy for so long that this necessary correction effort and ego/pride swallowing will be like swallowing a huge, gagging, ultra bitter pill. Americans will not do this willingly. Ultimately, these hard but necessary steps may be forced on an unwilling populace through an already in-place recession, and I fear, ultimately, another Great Depression...

Comment by Sanjay Garg

Wed, 15 Aug 2007 19:15:12 EDT

@bd: The blue collar immigrants are more than nannies and gardeners, they actually run the entire plant. As for who will fund American medicare, medicaid etc., if I were the Chinese, Japanese & Koreans, sitting on a combined $2 trillion of foreign reserves and highly dependent on the continued solvency of the U.S. for my own well-being, I would securitize this debt, raise big money & strike a deal with the U.S.

Comment by bd

Wed, 15 Aug 2007 17:04:24 EDT

Well, Sanjay, the issue relates to who will fund the ever increasing pressure on medicaid, medicare, pensions and other aspects. For that, you need a much wider tax base, highly productive population and good high value jobs. Given that wages have been stagnant for a good decade, the only way you are going to generate additional funding for support will not come from illegal immigrants who are gardeners and nannies but from immigrants who bring in skills to generate additional value added capital. Again, this is just one way to keep on the pay as you go system alive. I do not think this is sustainable but the eventual crunch can be postponed for a while. But again, this is hypothetical as immigration reform is dead in the water now and for the next 4-5 years. Vivek researched the rate of company formation by immigrants who came to the USA to study and then went on to form companies, found that immigrants were better at generating jobs, higher productivity and higher returns on capital. cheers bd

Comment by Sanjay Garg

Wed, 15 Aug 2007 15:44:22 EDT

@bd: I meant value added by not just tax paying (and not the remittance types) but value addition in terms of higher productivity as well as they themselves generating jobs. So when you compare say an Indian engineer or a Chinese chemist, both work hard(er) thereby having greater productivity but also have a greater propensity to create their own businesses. See vivek wadhwa's work at Duke University, he has done quite a lot of research on immigrants value generation Most immigrants are economic migrants, themselves seeking jobs, and many do end up as entrepreuners. I don't have numbers but the ratio must be 1 in a 100. So, I'm a little unclear how one builds a national immigration strategy around the hope that some immigrants will come in and potentially start businesses, generate jobs etc. I'm not really familiar with Wadhwa's research on immigrants but I hope he does a better job than the cheerleading testimony he gave in the U.S. Congress.

Comment by Sanjay Garg

Wed, 15 Aug 2007 14:45:48 EDT

#29: Actually, I'm not sure what role confidence is playing in all this, going forward. Keep in mind that even after experiencing the U.S. subprime meltdown, many foreign investors rushed to safe haven in U.S. Treasuries, Govt. Bonds etc! maybe this is due to force of habit, lack of a credible alternative or actual confidence in the U.S. govt., but the fact remains that people rushed in to lend even more money to the U.S.! This tells me that for many lenders, lending to the U.S. is not really a function of confidence but perhaps more importantly whether the American economy is open to their exports. China, Japan, Korea etc are so closely tied to the hip with the U.S. that I cannot see anyone making extreme moves in the near future.

Comment by bd

Wed, 15 Aug 2007 13:58:55 EDT

yes, those are from the two websites!, lol, but the reason why there are only 5 is because I suspect the nominations by dubya havent been confirmed by the senate. On the other hand, there are various important committees of the bank of england, mate, which committee did you mean?

Comment by temporal

Wed, 15 Aug 2007 13:49:08 EDT

(long post) beady: thanks:) mentioned the same to a dear friend: she sent me this: I How are the Chairman and members of the Federal Reserve Board of Governors selected, and what is the term of office? The seven members of the Board of Governors are nominated by the President of the United States and confirmed by the U.S. Senate. By law, the appointments must yield a "fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country," and no two Governors may come from the same Federal Reserve District. The full term of a Governor is fourteen years; appointments are staggered so that one term expires on January 31 of each even-numbered year. A Governor who has served a full term may not be reappointed, but a Governor who was appointed to complete an unexpired term may be reappointed to a full fourteen-year term. Once appointed, Governors may not be removed from office for their policy views. The lengthy terms and staggered appointments are intended to contribute to the insulation of the Board--and the Federal Reserve System as a whole--from day-to-day political pressures to which it might otherwise be subject. If all Governors serve full terms, a President would be able to appoint only two Governors during a four-year presidential term. Moreover, even a President reelected for a second term would not have appointed a majority of the Governors until late in the second term. In reality, many Governors do not complete their fourteen-year terms, and recent Presidents have averaged more than one appointment to the Board every two years. As stipulated in the Banking Act of 1935, the Chairman and Vice Chairman of the Board are chosen by the President from among the sitting Governors and must be confirmed by the Senate. They serve terms of four years and may be reappointed as Chairman or Vice Chairman until their terms as Governors expire. The Chairman serves as public spokesperson and representative of the Board and manager of the Board's staff and presides at Board meetings. Affirming the apolitical nature of the Board, recent Presidents representing both major political parties have selected the same person as Board Chairman. and II The current governance and accountability framework is set by the 1998 Bank of England Act, which provides for a Court of Directors, a Committee on Non-executive Directors within Court, and a Monetary Policy Committee. The Court of Directors Court consists of the Governor, two Deputy Governors and 16 Directors. The Directors are all non-executive. The Governors are appointed by the Crown for five years and the Directors for three years. Details of the current Court can be found in the Bank's Annual Report. Under the Act, the responsibilities of Court are to manage the Bank's affairs, other than the formulation of monetary policy, which is the responsibility of the Monetary Policy Committee. Court's responsibilities include determining the Bank's objectives and strategy, and ensuring the effective discharge of the Bank's functions and the most efficient use of the Bank's resources. The Monetary Policy Committee (MPC) The Bank of England Act establishes the MPC as a Committee of the Bank, subject to the oversight of NedCo, and sets a framework for its operations. Under the Act, the Bank's objectives in relation to monetary policy are to maintain price stability and, subject to that, to support the Government's economic policies, including its objectives for growth and employment. At least once a year, the Government specifies the price stability target and its growth and employment objectives. The MPC must meet at least monthly; its members comprise the Governor and Deputy Governors, two of the Bank's Executive Directors and four members appointed by the Chancellor. The MPC's decisions are announced after each monthly meeting and minutes of their meetings are published two weeks later. The quarterly Inflation Report includes the MPC's projections of inflation and output.

Comment by bd

Wed, 15 Aug 2007 13:35:07 EDT

t, i am not up to date with the fed but i suspect the delay is because of the senate hearing requirements, that is unfortunately very common, the senate diary is so full that getting the confirmation hearings on the banking and supervision committee is a pain. As long as there is an odd number of people, its ok. also, board of directors of the old lady? do you mean the monetary policy committee? which actually sets the rate? you checked the BoE website?

Comment by bd

Wed, 15 Aug 2007 13:27:36 EDT

Incidentally, for those who want macroeconomic data, this is a good site, http://stats.oecd.org/wbos/default.aspx?DatasetCode=MEI_CLI and the world bank also has a good set of data

Comment by bd

Wed, 15 Aug 2007 13:26:36 EDT

#26, Sanjay, I meant value added by not just tax paying (and not the remittance types) but value addition in terms of higher productivity as well as they themselves generating jobs. So when you compare say an Indian engineer or a Chinese chemist, both work hard(er) thereby having greater productivity but also have a greater propensity to create their own businesses. See vivek wadhwa's work at Duke University, he has done quite a lot of research on immigrants value generation.

Comment by bd

Wed, 15 Aug 2007 13:23:54 EDT

25#, yes, the deficits existed for a long period of time, but you have to remember that for most of the time, the deficit was funded by americans, not foreigners, that is a comparatively recent phenomena. You have to remember what i said, people will keep on funding the deficit as long as there is confidence that the USA will be able to pay back the money and/or people need to hold dollars. Now let me point you in few directions to think about the confidence bit. 1. wages are stagnant for the past 10 odd years. 2. savings rate is near or even negative 3. most of the investment is currently being funded out of debt, general taxation levels are progressively dropping because of tax wheezes and stuff. that gives rise to some concern. Now you know as well as I do, why countries such as CHina, Japan and and and are purchasing US securities. That is because the american consumer is purchasing their goods and they need USD to pay for it. Till now and in the future, investing in the USA makes sense. That's why they are holding USD. They arent holding it for any sentimental reasons. Let me throw a hypothetical situation at you. right now, we are looking at anything between 20-40% (depending upon how you measure it) of the population are less than 100% medically covered. So if you cut back on consumption dramatically, what will happen to the imports? Or putting it in another way, if the democrats suddenly pull the plug and raise barriers to chinese investments and trade, what do you think the chinese will do with their USD holdings? And what will happen if the CHinese do do so? 4 months back, one vice minister made the mistake of saying that it was considering a rebalancing of the currency basket against the yuan, the bloody markets went berserk!. it is not bad, the situation that is. But the warning is timely.

Comment by bd

Wed, 15 Aug 2007 13:05:31 EDT

#24, yes, I agree, americans are a strong people and can pull through, its the government and political parties that i am worried about, lol.

Comment by temporal

Wed, 15 Aug 2007 12:31:04 EDT

beady: with the increasing shift in 'reserve' held in euros and other currencies the Almighty dollar is not all that almighty however this course correction will take quite some time...9like a super tanker takes a long while to turn around) agree with you ... the world has not known to function in a uni-power alignment this will change, in time;) khair two queries why are there only five directors of the Federal Reserve currently and where can i find info on the election of the board at the bank of england? why are they so secretive?

Comment by Sanjay Garg

Wed, 15 Aug 2007 11:32:51 EDT

you need to have value added immigrants in place, not the current type of immigrants unfortunately. Virtually the entire "property, plant and equipment" of America is run by these blue collar immigrants, not to mention the large numbers employed as migrant farm labourers in the agri sector (which still needs a large subsidy btw and which would perhaps be significantly larger these people were paid "American" wages/ benefits ). So the value-add is very much there, just that it is below the radar currently. I do take the point that value added immigration ( i.e. tax paying) is needed but, unlike what Chandra says, I think this will be much tougher for America for at least two reasons (1) because the American economy is simply not creating the high value jobs anymore (2) competition from other western nations who will also be looking for "high value", tax-paying immigrants to support their own social programs.

Comment by Sanjay Garg

Wed, 15 Aug 2007 11:07:02 EDT

@bd: The deficits are a symptom, not the problem per se. But many analysts counter this by drawing attention to the fact that America has had deficits, debt etc since its very inception and it is still the leading economy in the world. Of course, this reasoning says nothing about how economic strength/ weakness has affected and caused socio-cultural change in the U.S. over the years bit it is still an argument for a gradual societal shift rather than a collapse. If for no other reason than because economies like Japan, China, Korea, Canada etc. have a vested interest in a strong USD and they will go a long way to prop it up economically.

Comment by Chandra

Wed, 15 Aug 2007 10:46:17 EDT

BD Only time will tell. However, I am pretty confident that the Americans will pull this through. They are a strong nation with extremely innovative people, they will find a way.... rgds

Comment by silentgod

Wed, 15 Aug 2007 10:44:04 EDT

America's days as a world power are numbered. America no longer has the monopoly on technologically advanced industrial production. Consequently all the industrial-based, and services-based jobs are leaving the US in shiploads. Why would you pay somebody $30/hr, plus put up with union crap, cosmically hugh health benefit cost, and overall inefficiency, when you can go across the border to Mexico, or to South America, or Asia and pay $3/day, with inconsequential health and general benefit cost, and receive overall 150% better production efficiency? America is now the greatest debtor nation in the history of this planet. The only thing debt affords you is borrowed time, which is what America is living on. People who compare the America of today to the America of the 80's do not remember that, even though inflation was atrocious, AMERICA WAS STILL A CREDITOR NATION and still had an industrial technological production edge, plus all the service sector jobs had not been shifted to India! A previous poster made a good point about somebody's ability to keep borrowing money: People will keep lending you as long as they feel they have equitable redeemable interest. At some point, it will dawn on the world that America no longer really has equitable redeemable interest. That's when the bottom falls out, and America as we know it becomes an inevitable has-been, in the tradition of Greece, Rome, Britain, Spain, etc. By the way, do you realize that Portugal used to be like America? When was the last time you heard about Portugal?

Comment by DEEPSTER824

Wed, 15 Aug 2007 10:42:17 EDT

I agree most people want to see the US fail. Be careful what you wish for...A world run by the Russians and Chinese is not really appealing.

Comment by bd

Wed, 15 Aug 2007 10:00:52 EDT

Chandra #20, lets see, buddy, i am not at all confident about immigration reform. the problem is that for a solution like yours, you need to have value added immigrants in place, not the current type of immigrants unfortunately. The blue collar immigrants generally start adding value from the 2nd generation onwards which is far too late. cheers bd

Comment by Chandra

Wed, 15 Aug 2007 06:25:31 EDT

BD Good one. I read this on Drudge the other day. I think what one needs to highlight is that the comptroller was trying to identify areas of weaknesses as opposed to predicting a definite scenario. We are all aware of the deficit (which is suprisingly reducing since the tax breaks of 2001) and the concerns with social security. I am quite confident they can fix them all. It is only a matter of time. Afterall the deficits of the 80s became surpluses of the 90s . Sustained and planned immigration will enable them deal with social security issues over above much needed reform.

Comment by Aaman

Wed, 15 Aug 2007 02:30:49 EDT

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